This is Why Chinese Economists Back the US Chip Ban

Summary

The speaker discusses three key factors driving China's success: state capacity, correct industrial policy, and 'learning by doing.' China's strong government and sophisticated bureaucracy have supported industrial growth, but the country still faces challenges, especially in high-tech sectors like chip manufacturing. The speaker argues that the U.S. trade policies, particularly those under Donald Trump, inadvertently force China to innovate in chip technology. Despite current challenges, China's large manufacturing base and government-led industrial strategies position it to be a future leader in innovation and technology.

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Q & A

What are the three key factors that contributed to China's success according to the speaker?

The three key factors are: 1) State capacity, 2) Correct industrial policy, and 3) Learning by doing.

Why does the speaker emphasize the importance of 'correct industrial policy' in addition to state capacity?

While state capacity is necessary, it alone does not ensure success. Correct industrial policy, which requires a sophisticated bureaucracy and leadership, is essential for the effective design, execution, and implementation of strategies that drive economic growth.

What does the speaker mean by 'learning by doing' as a key to China's innovation?

'Learning by doing' refers to the process of gaining expertise and innovation through practical experience rather than formal education. In China's case, this is achieved by creating vast opportunities for engineers to work on real industrial problems, which fosters innovation.

Why does the speaker believe Jack Ma succeeded in China but might not have in other countries?

Jack Ma succeeded in China because the Chinese government created a market-friendly environment and platform that facilitated entrepreneurial success. In countries like India, the Philippines, or Argentina, the government might not offer the same level of support.

How does the speaker view Donald Trump's policy of restricting computer chip sales to China?

The speaker views it as a strategic mistake for the U.S. because it forces China to innovate and develop its own chip industry, which may benefit China in the long term while harming the U.S.

What challenges does China face in developing its own computer chip industry?

China faces challenges such as the WTO agreements, which prevent it from imposing high tariffs to protect its domestic chip industry. Additionally, developing the industry is expensive and time-consuming.

Why does the speaker argue that China is still in the process of completing its industrial revolution?

The speaker believes China has not fully completed its industrial revolution because it still has a significant agricultural sector that is not modernized, and a large portion of its population lives in rural areas. China's per capita income is also still at the global average.

How does the speaker explain China’s rapid rise as a global textile producer before joining the WTO?

China became the world's leading textile producer and exporter by 1995, six years before joining the WTO. This was due to 15 years of government nurturing and support for the textile industry, rather than WTO membership itself.

What role did the Chinese government play in the development of new energy technologies and electric vehicles (EVs)?

The Chinese government provided financial support, built the necessary infrastructure, and helped create a foundation for industries like EVs and solar energy. This support has allowed China to become a global leader in these sectors.

What comparison does the speaker make between China's and the U.S.'s approach to industrialization?

The speaker notes that in the 19th century, the U.S. focused on applied science and manufacturing, rather than fundamental research. Similarly, China is following this path by focusing on practical industrial development and innovation, which lays the foundation for future leadership in basic science.